South Koreans Hold $100M in Overseas Digital Assets as Tax Rule Review Begins

South Koreans Hold $100M in Overseas Digital Assets as Tax Rule Review Begins

In response to a recent report from South Korea’s tax watchdog, the country is considering updating its tax regulations to crack down on unreported overseas earnings involving digital currencies, stocks, and other financial assets.

According to the National Tax Service (NTS) report, approximately 1,500 individuals and companies have confirmed holdings of digital currencies located outside South Korea. The NTS report estimates the total value of digital currencies held abroad to be KRW 130.8 trillion (US$98 billion). This amount represents more than 70% of the total financial assets held by South Koreans in foreign accounts, which totals KRW 186 trillion (US$140 billion). The remaining assets consist of bank deposits, savings, and stocks.

Previously, the NTS faced challenges in taxing income earned overseas, but it now intends to restrict the ability of citizens to bring tax-free earnings into the country.

Since the beginning of the year, the NTS has been working on comprehensive measures to combat tax avoidance in South Korea by collaborating with other government agencies. Recognizing the borderless nature of digital assets, the NTS plans to cooperate with regulators worldwide to address the potential risk of tax base erosion posed by digital assets.

The report mentions that tax authorities worldwide, including the NTS, are preparing to exchange information in accordance with Information Exchange Reporting Regulations to address the challenges associated with taxing digital currency earnings.

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In order to respond to the risk of potential tax base erosion through digital assets, tax authorities around the world, including the National Tax Service, are preparing to exchange information in accordance with the Information Exchange Reporting Regulations,” read the report.

Despite the difficulties in taxing digital currency earnings, the NTS has achieved some success in tackling tax evasion. In 2022, the country announced that it had recovered unpaid taxes by seizing digital currencies from private individuals and corporations.

Additionally, municipal authorities in South Korea are considering following the central government’s lead in seizing digital currencies from individuals who default on tax payments. For example, Cheongju authorities have reportedly ordered local exchanges to provide data on the activities of up to 8,000 users who owe taxes of up to KRW 1 million (US$750).

Indonesia’s new rules

Meanwhile, in Indonesia, the Revenue Department has announced plans to impose personal income tax requirements on overseas earnings from digital currencies and other digital assets, as well as profits from assets earned abroad. These new tax rules are expected to take effect at the beginning of 2024.

Official from the Thai Revenue Department said “The principle of tax is that you must pay tax on income you earn from abroad no matter how you earn it and regardless of the tax year in which the money is earned

However, these new regulations have faced criticism for lacking enforcement measures and potentially sending negative signals to foreign investors and private bankers.

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